Madison County Legislative Forum Comments - Overtime Tax Cut

Testimony from Jacob Morrison, a delegate of the American Federation of Government Employees (AFGE) Local 1858, in support of maintaining the overtime tax cut:

Last year, the Alabama legislature passed multiple new pieces of legislation that deplete funds from the Education Trust Fund. In particular:

• The elimination of the income tax on overtime wages is estimated to have been a much bigger drain than initially projected (at as much as 240M in 9 months), though the exact amount is contested.
• The CHOOSE Act, which will drain as much as 100M in the first year and who knows how much in future years. If other states provide a guide, we could see significant cuts to the budget.

Instead of looking to repeal the CHOOSE Act, however, which will primarily benefit wealth parents who already send their children to private school once the income eligibility cap is lifted, or even looking to make permanent the income eligibility cap, State Senator Arthur Orr is laying the groundwork in interviews for the idea of not renewing the overtime tax cut to fill this purported budget shortfall.

I oppose this explicit choice to side with wealthy Alabamians over working Alabamians, and hope that our legislative delegation will as well.

While I am not anti-tax, far from it, there are clearly much better places that you could take from to fill this potential budget shortfall.

For example, Alabama currently allows taxpayers to deduct their federal income taxes from their state income taxes. Low income Alabamians receive an average benefit of $3 per year from this deduction. Even upper income taxpayers in Alabama only receive $549, while the top 1% of Alabama taxpayers benefit to the tune of $12,901 per year. Only one other state has such a deduction. Repealing this benefit for the wealthiest people in Alabama would generate as much as $833M annually. This would more than cover even the most extreme estimates for the shortfall from the overtime tax cut, while also covering at least the current shortfall from the CHOOSE Act.

Another option is repealing the CHOOSE Act, or, at least, making the income cap permanent so that it does not become just another big giveaway from the wealthiest in Alabama.

And finally, we could always just raise taxes on the wealthy in Alabama. I hope that this delegation will choose to seek revenue from the wealthy in Alabama, rather than raising taxes on workers first.